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Amgen: Down but Not Out


The world's leading biotech, Amgen (AMGN), has had a tough year, besieged by regulatory worries that slowed sales of its two blockbuster drugs, Epogen and Aranesp. Its stock, which traded as high as 76.50 a year ago, hit a 52-week low of 48.30 on Aug. 17. It has since bounced up to 57.62 on Oct. 9 as bargain-hunting value pros snapped up shares. "This is a great opportunity to buy into one of the premier names in a key industry," says George Putnam, editor of The Turnaround Letter. Not only are the regulatory issues abating, he says, "but more important, Amgen has the drug pipeline, manufacturing capability, and financial resources to remain a leader in providing biotech solutions" to the many diseases faced by the graying population worldwide. Some of Amgen woes heated up in July, when Medicare said it would limit the use of Aranesp, which generated sales of $4.1 billion in 2006, for chemotherapy-induced anemia Medicare also ruled certain treatments were no longer reimbursable. But Steven Silver of Standard & Poor's (MHP), who rates Amgen a buy, says congressional intervention seeking reconsideration of proposed reimbursement limits may yet avert Medicare's plan, which could cut Aranesp's sales by $500 million. Amgen's fundamentals "remain solid," says Silver, who has a 12-month target of 64.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Emoticons. These are the funny faces :-) that show up in e-mail. An Internet outfit, IncrediMail (MAIL), designs and sells such customized e-mail software. It lets users design creative features to go with messages, such as desktop wallpaper, and a database of animations with 3-D and sound effects. IncrediMail makes money by selling its products, licensing them, or co-branding with operators of Web sites, plus ad sales. It has teamed up with Google (GOOG) and Yahoo! (YHOO) --sharing revenue--for advertisements and for the use of its products, which are available in nine languages.

Matthew Weiss of Maxim Group, who rates the stock a buy, says its "revenue growth continues to exceed our projections." He figures it will earn 37 cents a share on sales of $19.1 million in 2007 and 63 cents on $24.5 million in 2008, vs. 25 cents on $10.8 million in 2006. Weiss sees the stock, now at 8.75, at 12 in a year. IncrediMail is selling its products in China in time for the Olympics. A big buyer of the stock is Longview Fund, which has acquired 1.2 million shares or a 13.3% stake.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Tiny O2Micro International (OIIM) recently got settlements from giants Sony (SNE) and Samsung on patent litigation it had filed against them. O2 is a designer of analog semiconductors for power management and security applications in LCD TVs, laptops, and other gear. O2 expects to get business from the two companies.

Second-quarter sales jumped 36%, "but this is just the beginning," says Graham Tanaka of TANAKA Growth Fund (TGFRX). Added revenues from the settlement, plus new product-design wins and cost-cutting, should spur a 25% growth in sales in 2008, he says. Tanaka figures O2 will earn 70 cents a share in 2007 and $1 in 2008, vs. 21 cents (diluted) in 2006. He figures the stock, now at 16.66 will hit 20 in a year. Vernon Essi of investment firm Needham, who rates O2 a "strong buy," expects hefty sales from LCD TVs in 2007 and 2008.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.


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